Bitcoin prices are skyrocketing. Business Insider reported Thursday bitcoin hit a record high, exceeding $2,700 per coin, up from $1,400 on May 1. The world’s second most influential cryptocurrency, Ethereum’s ether tokens, also broke its record this week. Ether is now evaluated at more than $200 per token, CoinMarketCap reported. For comparison, ether was selling for just $60 on April 27.
There are a variety of factors driving up the market value of cryptocurrencies.
The past few weeks have seen increased corporate investment in Ethereum, alongside a global “blockchain boom,” where companies like Ripple and IBM announce partnerships with leading financial institutions around the world. Japan has even kickstarted the process of recognizing bitcoin as legal tender. “I think it’s mostly to do with the fact they may have ended the ongoing political stalemate over scaling may be over,” Andrew Keys, head of global business development at blockchain software developer ConsenSys, told CNBC. Many experts say economic shifts in China are another key component behind soaring bitcoin prices.
The Chinese yuan is suffering from poor performance in local equity markets and rising interest rates. Jeffrey Gundlach, CEO of DoubleLine Capital, tweeted about the falling Shanghai Composite Index on Tuesday, theorizing the Chinese are now searching for safe investments outside China. Although Chinese markets are far from crisis, Gundlach’s tweet implied waning prices sent a wave of Chinese buyers to bitcoin. Chinese blockchain expert Patrick Dai, founder of the smart contract platform Qtum, told International Business Times he thinks China’s bitcoin market is one of the factors driving up bitcoin prices.
“It’s hard to say, but I think part of the reason is the Chinese government. The regulators in China, they’ve forbidden withdrawal of bitcoin from the exchange,” Dai said. “That’s maybe part of the reason the price is going up.” Chinese authorities are currently working on a plan for bitcoin regulation since Chinese bitcoin enthusiasts account for the vast majority of global bitcoin trading. Cashing out may be discouraged, but trading and stockpiling are still a legal gray zone for Chinese cryptocurrency users. Many young Chinese finance experts now make their living solely from cryptocurrency trading.
Dai’s own career could be seen as a microcosm for the controversy surrounding cryptocurrency in China. The blockchain startup Qtum, sometimes referred to as “China’s Ethereum,” recently raised around $15.6 million with an initial coin offering that included investments of more than 10,000 bitcoins. Yet Dai’s reputation is still haunted by accusations Dai allegedly committed fraud in 2014 by pocketing much of the bitcoins raised by an ICO for the now defunct BitBay project. However, cryptocurrency fundraising is still so new, it’s hard to determine whether Dai is playing by the rules.
“I did nothing wrong with BitBay,” Dai told IBT. He said any related criticism of Qtum’s ICO was inspired by rivalry from the cutthroat cryptocurrency scene. “Five years ago, most of the people called bitcoin a scam,” he said. “Cryptocurrency and blockchain is the future of money.” Indeed, many people around the world are concerned the cryptocurrency market is rising so quickly, it has created a bubble destined to burst.
On the other hand, most experts say cryptocurrencies like bitcoin, and ether will continue to rise and, maybe after a few hiccups, become sustainable in the long run.
“I would not be surprised to see the bitcoin price doubling again to around $6,000 by the end of the year,” Aurelien Menant, CEO of the regulated cryptocurrency Gatecoin, told CNBC on Thursday. The Wall Street Journal reported Fidelity Investments Chief Executive Abigail Johnson is equally confident in bitcoin’s long term prospects.